6% VAT on construction for rental purposes has been in effect since June 1

The federal budget agreement for 2024 announced a small but significant change: the VAT rules for demolition and reconstruction have been amended. Built-to-let construction projects are now once again eligible for the 6% VAT rate. An interesting development for the real estate sector!

Since the penultimate legislative amendment, the reduced rate had applied only to demolition and reconstruction projects in which private individuals had their own homes built and/or legal entities had homes built for long-term rental as part of social housing policy. The real estate sector was far from happy with this and argued, among other things, that this would contribute to the deterioration of city centers in particular.

Finance Minister Van Peteghem clearly heeded the real estate sector’s call. He announced that the reduced VAT rate of 6% would once again be extended to demolition and reconstruction projects involving residential properties intended for rental to individuals. 

The approval of this legislative amendment proceeded at breakneck speed. The House gave the green light at the end of April, but we still had to wait for its publication in the Belgian Official Gazette. This created some tension and anticipation within the sector. And then, on May 29, the law was finally published. As a result, the regulation took effect as early as June 1, 2024—sooner than many had expected.

What exactly does this change entail? Let’s be clear: if a developer demolishes and rebuilds a home for rental purposes, they can now benefit from a reduced VAT rate of 6%. However, there is one important condition: the rebuilt home must be rented out as a primary residence for at least 15 years. This long-term commitment is crucial to qualifying for the reduced VAT rate.

What does this mean for you? If you are planning a construction project that meets the criteria, you can now take advantage of this favorable VAT scheme. This not only offers financial benefits but also encourages the development of new rental housing, which can have a positive impact on the rental market.

This change to the VAT rules is a step forward for the real estate sector and offers exciting opportunities for developers and investors. With its rapid approval and implementation, now is the perfect time to plan your projects and take advantage of the 6% VAT rate. So, what are you waiting for?